Domino Theory

In the real estate business we occasionally run across a situation where a seller needs to sell their house and get the profits from it before they can buy a new house. In a perfect world a Realtor can set it up so that the seller can close on their current house and purchase their new house in back to back closings. I have done this several times and have learned form my experiences. It is best if you use one title company to do both closings. This way you are not running across town to get from closing 1 to closing 2 title companies. Also when money from the first closing has to get to the second closing title company, the money must be wired which could take hours. The logistics are critical to get the job done.


I recently had a transaction where 3 or 4 houses were involved. Each owner had to get the money from their current house in order to purchase their new house. Hence the domino theory. My listing was the first house to close and everything depended on it to start the dominoes falling.

My listing was a very nice ranch in Pike Township. The sellers had taken excellent care of it and it had great amenities. The sellers were some of the nicest clients I have ever had. The house had a good offer on it in 55 days. We negotiated a closing date a couple months out so that my sellers could find another house to buy although we had already been looking. We found a new house and made an offer. After negotiations were done which included having back to back closings at the same title company we had two dominoes in a row. The sellers of the house that my buyers were purchasing were in the same situation. They needed the profit from their house to buy the next one. They found a new house and were set to close on it the same day but not at the same title company. I am told that there was one house(domino) after that but did not verify.

Everything was set. We all were ready to close July 10th. My sellers had already moved everything out of their house and it was being held by a moving company. They were living in a essentially bare house with 2 very small children which was very challenging. Their plan on closing day was to pick up what was left and put it in their car, do the 2 closings at the title company and meet the movers at their new house to unload their furniture. It just so happened that the owners of the house they were buying had the same idea and did the same thing.

On the evening of July 9th I got a call from the buyers agent who had the buyer for my listing. She had bad news. The lender had checked the buyers credit that day and found out that the buyer had made a late payment. The closings were off. The dominoes were not going to fall in the morning. I was told that it could be a week to 10 days before the lender would allow a closing. They had to verify that the buyer did not owe any money where they made the late payment and get a credit re-score. I notified my seller. They were willing to wait. The sellers of the new home they were buying were also willing to wait.

After massive communications with my sellers, the buyers agent, the listing agent of the house my buyers were going to buy and the lender of the first buyer, we all ended up in a holding pattern. Days turned into weeks and weeks into a month. Patience was drawing thin and at any minute somebody might pull the plug and the dominoes would not fall. My sellers costs were adding up. They had to pay their lender a fee to extend the lock on their mortgage rate. They also had to pay the moving company to store their furniture. The lender was not communicating what was going on which left everyone very skeptical. There were two times during the month that the lender ok’ed the close and then canceled the day before. My seller and I communicated regularly. My main question to them was how badly did they want this new house. There answer was “very badly”. They were willing to wait.

Another challenge came into play. My sellers daughter was starting school. The new school district would not allow her to attend unless the family was living in the school district or they could tell the school when the closing date was. After 4 weeks we had no answers. It meant that the daughter might have to attend the school in their present school district for a couple of days and then transfer to the new district once they closed on the new house. Not a good situation for a child just starting school.

After the 5th week we finally got a verified closing date. It was going to be the day before school started in the new school district. At that point I questioned it. Was it really going to happen?

On August 14th the dominoes started to fall. The lender showed up at the first closing. He acted like nothing out of the ordinary had happen. He even talked about the last two days before closing that he had spent on the golf course. My seller heard that and told me after the closing that he almost threw something at the lender. The lender also gave me a folder filled with information about their company and a stress ball. It was to late for a stress ball. What I wanted was a quart of whiskey. The amount of stress this lender had put everyone through was just unreal. This lender will remain nameless but it is a lender that I have never referred business to and never will.

I am a very patient person. Probably to patient at times for my clients. I did not lose my patience on this transaction but I did write a letter to the lenders branch manager and regional manager. I don’t think it did any good but you never know.

No two transactions are the same in a Realtors life. In my 13 years as a Realtor I can’t remember a transaction that affected so many lives at one time and caused so much misery. Hopefully it will never happen again.

Showings Are Up!

Here is a graph from Centralized Showing Solutions showing amount of showings in price ranges. Centralized Showings makes appointments for Realtor showings for 80 percent of houses listed in Pike Township. As you can see the showings between $60,000 and $160,000 are constant for the past 10 weeks. There was a peak about 10 weeks ago but things slowed down and now they are picking back up. I use charts like this to see if I am getting my share of showings on my listings.

Click Picture To Enlarge

Click Picture To Enlarge

What Are Closing Costs?

Survey on closing costs
I read online this morning a survey that was conducted by ClosingCorp that two in three millennials (18 to 34 years old) who plan to own a home are unaware of closing costs. It also said that 34 percent of potential homeowners are “Not Very” or “Not At All” aware of closing costs.

So…I thought I would try and explain closing costs if your were to buy or sell an average home in Pike Township for $125,000.

Closing costs are all the costs associated with buying or selling a home. Here is a list of some types of closing costs that can be in a transaction. It does not cover all closing costs. Each transaction is different.

Homeowner association dues
Homeowners associations (HOA) usually have yearly fees. For the most part they are due in the beginning of the year. If the home was sold in the middle of the year, the seller would get a credit from the buyer.

Homeowner association transfer fee
A fee charged by homeowner associations that are professionally managed and some that are self managed that covers the costs of paperwork involved in switching owners.

County property taxes
In Indiana property taxes are paid a year in arrears. Property tax payments are billed and due in May and November. If the May 2015 bill was paid, it covers January through June of 2014. The November 2015 bill payment covers July through December 2014. If the property closes today April 1st 2015, the seller owned the house from January 2014 through April 1st 2015 and would be responsible for the property tax. Since the buyer would get the property tax bill in May and November for the year 2014, the seller gives the buyer a credit for property taxes at closing. The credit would also cover January 1st through April 1st 2015. This is standard operating procedure at closings in Indiana. (See Escrows)

Seller paid closing costs to buyer
Depending on how the transaction was negotiated, the seller could end up paying some of the buyers closing costs. There a lot of variables here. Some of them are 1)How motivated is the seller to sell 2)Sellers are more incline to pay some of the closing costs of the buyer the closer the buyer is to offering list price for the home 3)how good is the buyers agent in negotiating.

Seller paid real estate brokerage commission fee
Traditionally the seller pays the brokerage sales commission. If there were a listing agent’s brokerage and a buyers agent’s brokerage involved, the total commission is split between the two companies. If the listing agent is representing both seller and buyer then the total commission goes to the listing agents brokerage.

Fees paid by buyer associated with getting the loan
– origination fee
This is the fee by the lender for getting you the loan

– appraisal fee
Lenders require that the property be appraised. This is the fee that the appraiser charges the bank which gets passed on to the buyer.

– credit report
This is a fee charged by the lender for getting the buyers credit report.

– tax service
A lender fee paid to a tax service provider for information on the real estate property taxes.

– flood certification
A lender fee for a document showing flood zone information.

– flood determination fee
A lender fee paid to the service providing information on whether the property is in a flood zone.

– daily interest charges
When your mortgage is due the 1st of the month you are actually paying for month before. If you bought and closed on a home April 1st, your first payment would be payment would be June 1st but the lender makes you pay interest on the loan from April 1st to the end of the month. This is why most closings are at the end of the month. Less interest paid by buyer.

Down payment
Depending on the type of loan, this could be anywhere from 3 percent of the sell price of the house to 20 percent or more. The lender will require this to get the loan.

– property taxes
Part of the monthly mortgage amount contains an escrow amount for county property taxes. It is usually 1/12 of the yearly amount. It is held by the lender who pays the property tax bill. At closing the lender wants to make sure they have enough escrowed for the first property tax bill. They may require the buyer to put money in escrow in advance.

– insurance
Part of the monthly mortgage amount contains an escrow amount for home insurance that the lender requires. It is usually 1/12 of the yearly amount. It is held by the lender who pays the insurance bill. At closing the lender wants to make sure they have enough escrowed for the first indurance bill. They may require the buyer to put money in escrow in advance.

Lenders title insurance
Title insurance offers financial protection against title problems that could not be found in the public records, are inadvertently missed in the title search process, or those that may arise from fraud or forgery. The title policy a lender requires only covers the lender’s interest in a property.

Sellers title insurance
Title insurance offers financial protection against title problems that could not be found in the public records, are inadvertently missed in the title search process, or those that may arise from fraud or forgery.

Search exam fee / Title services fee
Title company charge to research and process the property.

Closing fee
Title company fee for the actual physical closing. This could be paid by the seller of buyer or split. Depends on how the transaction was negotiated.

The title insurance enforcement fund is established for the following purposes:
To pay the costs of hiring and employing staff in the area of enforcement of title insurance law.

Courier fee
Title companies won’t deliver there own documents because of liability. The hire delivery services to deliver documents and pass the costs on.

Attorney fee for deed/affidavit
This is the document that an attorney prepares that when signed transfers the property to the new owner.

Closing protection letter
Closing protection letter is essentially an agreement from a title insurance company to a lender that indemnifies the lender against any issues arising from a closing agent’s errors, fraud or negligence.

Wire fee
Title company fee charged to pay off existing loans.

Government recording charges
Lender mortgages and lender notes are usually recorded. The county charges fees for recording which get passed on by the title company.

Home warranty
If a home warranty was negotiated in the transaction it would be considered a closing cost.

Here is an example of buyer and seller closing costs on a $125,000 home;
Disclosure – PLEASE NOTE – Lenders and title companies charge different amounts for the same services. It is best to shop around for a lender. They are required by federal law to give you a Good Faith Estimate of loan costs after you apply. Ask your Realtor what title company they recommend and why. A listing agent usually has preliminary title work done (for free) when they list a house. This insures that there won’t be any last minute surprises about the ability to transfer a property right before closing. If a title company does preliminary title work up front, chances are that the listing agent and seller will want to close at that title company although it can be negotiated. This is just an example and these are just estimated numbers.

Seller closing costs

$125,000 Sale price
$  8,750 Brokerage commission
$    400 Sellers title insurance policy
$      5 TIEFF fee
$     25 Wire fee
$     50 Courier fee
$     60 Deed/Affidavit document
$    405 Seller agrees to buy buyer a home warranty
$    280 Search exam fee
$  2,000 Seller agrees to pay some of buyers closing costs
$  1,500 Seller's credit to buyer for property taxes
$     25 Closing protection letter
$    100 -credit- Buyer gives credit to seller for HOA fee
$     75 HOA transfer fee
$    150 Closing fee (shared equally by buyer and seller)
$ 67,225 Payoff of existing mortgage

$ 45,950 Net to seller (usually a check given to seller)

Buyer closing costs

$125,000 Sale price
$118,750 -credit- Lenders loan (95%)
$  2,000 -credit- Seller pays some of buyers closing costs
$  1,000 -credit- Buyer put earnest money down
$  1,500 -credit- from seller for property taxes
$  1,188 Loan origination fee
$     30 Lenders charge for credit report
$     70 Lenders tax service fee
$     20 Lenders flood certification fee
$    400 Lenders appraisal fee
$  1,292 Escrow prepaids (property tax and insurance)
$    225 Daily interest charges by lender
$    600 First years insurance on the house (paid in advance)
$    195 Lenders title insurance policy
$     78 Title company recording fee
$    475 Title company services fee
$      5 TIEFF fee
$    150 Closing fee (shared equally by buyer and seller)
$     75 HOA transfer fee
$    100 HOA dues from time of closing to end of year

$  6,253 Buyer would have to bring to closing*

There could possibly be other charges to buyer and seller. For instance, if the buyer had a home inspection done and wanted something fixed and the seller agreed. The home inspection price to the buyer would be about $300. The repair costs the seller would pay for.

* If the amount is over $10,000 then the buyer has to wire the funds to the title company.

Real Estate Showings in Pike Made Easy

When you list your house in Pike you got to have showings in order to sell it. Depending on the seller, this can be easy or challenging. If the house is vacant then the showings are easy. If the owner is living in the house then it can be more challenging. In order to show a house a Realtor must get permission. If they don’t and show a house they are trespassing.

Over the past 30 years the evolution of showings has changed drastically with the help of technology. Today it is done completely differently than in the past.

Showings 30 years ago required the following;
Buyer wanted to see a house.
Buyers Realtor would call listing brokerage office.
Listing brokerage would set the showing up.
Buyers Realtor would arrange to pick up the keys at listing brokerage office.
(Normally buyers want to see a number of houses at a time. The buyers Realtor might have to pick up several keys at several offices.)
Buyers Realtor shows the houses.
Buyers Realtor returns all the keys to all the offices.
Listing Realtor might call the buyers Realtor after the fact and try and get feedback info for the seller.

Then lock boxes entered the scene. 26 years ago this was the lock box that was used on my house in Pike when I bought it;

A simple device where most brokerages had the special key to unlock it. This saved Realtor’s from having to run around town collecting key for houses to show.

The next step in the evolution was the combo lock box. There are several different kinds. Here is one of the popular ones;

Now the Realtor did not have to worry about keys in order to get into the lock box. They just had to call the listing brokerage, identify themselves, get the ok to show and get the combo for the lock box.

13 years ago when I started technology had taken over. If you are a Realtor, you are a member of Metropolitan Indianapolis Board of Realtor’s (MIBOR). If you pay your technology fee every year you are given a card, somewhat like a credit card that is programmed to use on the new types of lock boxes;



Some of these new lock boxes can be opened by a Realtor’s smartphone if programmed. Otherwise the credit card like card can open these locks with a programmed security code. Two great features of these locks are that the entry cards have to be renewed on very regular basis or they won’t work anymore. The other nice feature is that the lock box records who has opened it. That is a great security feature for sellers.

As with any free market when there is a need, somebody will figure out how to fill it. Brokerages did not want to handle showings. It is to time consuming and labor intensive. Companies started appearing nationally that would handle all showings for a brokerage for a price. It was reasonable enough for large and small brokerages to use. Now the listing office can enter in all relevant information on a new listing and not have to worry about keys or keeping track of showings. Today 80 percent of listings in Pike Township use Centralized Showing Solutions (CSS) in order to make an appointment for a showing. Centralized Showing Solutions has taken the technology a long way.

Currently if you want to make an appointment to show a house, you do the following;

Buyers want to see a house.
Buyers Realtor calls CSS.
Buyers Realtor identifies themselves and security code is checked.
CSS sets up the appointment and tells buyers agent how to get in (lock box type) and any other relevant instructions.
Buyers agent shows home.
Buyers agent get email from CSS asking for any feedback.
Feedback is sent to listing agent and seller if programmed.

CSS’s website for Realtor’s keeps track of all showings and feedback historically. It also allows the listing Realtor to send an email to all agents that have shown the property in case there was a price reduction or some other significant change in the property. This really saves the Realtor a lot of time.

Last year I came across a new type of lock box. I have only seen it on bank owned listed houses.


I had an investor last year that bought a house that had this kind of lock on it. At closing they told him the lock was his to keep. Actually I think he paid BIG for it. There was a $299 non-negotiable fee that he had to pay to do the deal. Best I can tell the lock was worth about $100. Banks try and get any kind of money any way they can.

Which Way Will Pike Sales Go This Year?

I love doing research on Pike Sales. I have followed and looked for patterns for the past 10 years.

Click picture to enlarge

Click picture to enlarge

If you look at the chart closely you will see that Pike Sales take off at the beginning of the year and peak by June or July. The standard theory is that buyers don’t want to move during the school year and disrupt their kids. Usually the time to move is during the summer. From the time a buyer signs a purchase agreement until the time they close the deal is between 30 and 45 days. This puts the buyers who found their house in April closing in May or June about the time school is out. There is a secondary peak in sales although not as great usually in August, September and October.

The ten year chart gets pretty messy. Here is a chart that covers 2013 through now.

Click picture to enlarge

Click picture to enlarge

In 2014 we ended December with a up note. It carried through to January of 2015 beating out the past two years. February pulled back to match February of 2014. My guess is that February 2014 was slow because of the snow. I imagine the same for 2015.

Currently there is a high number of Pendings in Pike. That means we are likely to see sales go up in April and May. I have noticed an increase in showings in the past two weeks with my listings. Talking to other agents I hear the same thing. I will be watching.

My next posting will be about showings in Pike.